Case Study:

Coca Cola

Background (1981-1997)
Roberto Goizueta was appointed CEO of the Coca-Cola company in 1981, following years of lagging shareholder returns.

Previous management teams had lost faith in the core and had sought diversification as a means to improve the company’s value – including Aqua-Chem industrial boilers and water treatment, wine, Ronco-Pasta Makers, and Flexible Products-plastic containers.


Our Relationship and Approach (1986-1989)
Achieve clarity of focus and unwavering commitment to maximizing share owner returns:

> Build Center lead development of core management capabilities

  • Organizational boundaries aligned with business economics
  • Systematic strategy development and review process with link to resource allocation
  • Linkage of economic results and incentive compensation

> Repeatable business model for maximizing profitable growth

  • Focus investment on most profitable businesses
  • Pursue integrated approach to market development
  • Achieve brand leadership

> Willingness to take educated risks and correct mistakes


Actions (1981-1997)
Under Goizueta’s leadership, the company:

  1. Eliminated economically unprofitable businesses including: industrial products, wine, packaging
  2. Strengthened the business model of the consumer beverage franchise through global market expansion and brand proliferation
  3. Infrastructure development, expanding the company’s global bottling and distribution network
Profitable Geographic Expansion:
Market Development Model
CocaCola_Table

Results (1981-1997)
During Goizueta’s 16 year tenure as CEO, Coca-Cola delivered superior top-line growth, margin expansion, and economic profit growth that drove average compounded total shareholder returns of 27% per year.

Profitable Geographic Expansion: Results
The majority of Cocoa-Cola’s profitable growth came from geographic expansion
> 2.2 actively reached consumers in 1984
> 5.2B actively reached consumers in 195 countries in 1994

Results

The organizational, financial and strategic capabilities produced spectacular product market, financial and capital market performance

Revenues and Operating Margins

Economic Profit and Stock Price